The People’s Bank of China and six other state regulators today jointly announced a complete ban on initial coin offerings (ICOs) in China, in perhaps the harshest measures ever taken against a new fundraising activity.
The Ministry of Industry and Information Technology, the State Internet Information Office, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the official insurance regulator together said that ICOs are potentially illegal fundraising activities and have gravely disrupted normal economic and financial order.
All types of on-going ICOs should immediately be halted, while individuals and entities behind completed ICOs should exit their activities and protect investor rights. The regulators will strictly enforce the rules and levy serious penalties for ICOs that refuse to adhere to the new policy.
At the same time, token exchange platforms are prohibited from providing exchange services between legal currencies and ICO tokens, as well as the exchange of different cryptocurrencies. Exchange platforms cannot provide pricing or serve as agents for tokens transactions.
Financial institutions and non-bank payment organizations are not allowed to provide account openings, registrations, transactions, clearance services for entities related to ICOs.
Two days ago, China Money Network reported that Beijing was considering a ban of ICOs.
The Chinese central bank considers ICOs as unapproved, illegal public fundraising activities, which is an unlawful act defined by a policy directive issued by China’s State Councile in 1998.
The tokens issued by projects do not have characteristics of a currency, do not enjoy the same legal status as a legal tender, cannot and should not flow in the market as a currency, said the announcement.
Various projects, usually related to blockchain technology, use ICOs to raise capital via issuing their crytocurrency-backed tokens to investors, normally backed by project white papers. China’s first ICO was completed last year and the market has skyrocketed since then.
During the first half of this year, 64 ICOs were issued in China, raising crypto currencies worth a total of RMB2.6 billion (US$420 million), taking over 40% of the global total, according to a report issued by China’s State Internet Financial Security Technology Expert Committee earlier this year.